For a chief executive in a business that some people believe has no future, Ken Abt talks confidently about the prospects for his thrift institution, First Federal Savings and Loan of Middletown, N.Y.

"We'll be around," he said. "We'll still be focused on people, money and their homes."

Whether First Federal will be a savings and loan association, however, is another question.

"Our customers call us their bank," Abt said, even though it's a savings and loan. They use "bank," he said, as "the generic term."

His comments highlight a paradigm of the paradox of the thrift industry: The business of the S&L industry will survive, but the S&L industry may not.

"The question is how will the need for housing finance be met?" asked Patrick Forte, president of the Association of Thrift Holding Companies. The answer will determine the future of the nation's S&Ls, he said, but it may make surprisingly little difference to home buyers.

"I think it will be transparent to the consumer," who will not notice the turmoil underway in the thrift industry, Forte said.

Already a majority of American home buyers are financing their homes through banks, mortgage bankers and other kinds of lenders that are taking over the business of the dwindling thrift industry.

In the last decade, the number of S&Ls has shrunk from 4,000 to 2,400 and will be down to 2,000 by the time the government completes the job of shutting down S&Ls that have already gone broke.

Even the industry's optimists estimate that only 1,500 institutions have a high probability of surviving the rigorous restructuring imposed by the S&L cleanup and reform law that was passed by Congress last year.

"The real agenda in Washington in 1989 was to give us five years to terminate this industry," Fred Webber, president of the U.S. League of Savings Institutions, warned his members at their annual convention earlier this month in San Francisco.

"That was not the goal of the Treasury, that was not the goal of the OTS," the thrift executives were assured by Timothy Ryan, director of the Office of Thrift Supervision, the agency responsible for the thrift cleanup. But that assurance was tempered by Ryan's statement that "I still have an open mind" about the future of the S&L industry.

A Simple Name Change The thrift scandal, the Keating Five and all the other baggage of the most costly financial disaster in the nation's history might be left behind by a simple name change, many industry executives believe. Many S&Ls have already utilized a rule that lets them call themselves "federal savings banks," but they still operate under the more restrictive S&L rules.

The name issue reflects not only the serious identity crisis facing the industry, but also the reality that the S&L business is not what is used to be. Until a decade ago, thrifts were a tightly regulated, carefully protected industry, nurtured by Congress to fill the needs of home buyers. In return for specializing in mortgage lending, the government gave S&Ls special tax breaks and allowed them to pay depositors one-quarter of a percent interest more on savings accounts than banks were permitted to pay.

Then came deregulation -- no limits on interest rates, few limits on investments and wide open competition from banks, credit unions, mortgage companies and all kinds of other financial institutions.

"People operated in this protected regulatory environment where you were told what you could do and what you couldn't do, and suddenly you were thrown into the jungle like little pussy cats. Like little pussy cats in the jungle, they were eaten up," said Herb Sandler, co-chairman with his wife, Marion, of World Savings in Oakland.

Today, many regulators say privately, that they believe the industry has no future or that the future of the S&L industry is not as savings and loans.

What that means is clear from the legislative agenda advocated by U.S. League of Savings Institutions members at their recent gathering. The two things they want most from Washington are to change the rules that restrict S&Ls from converting to savings banks and to change the law that limits the portion of their assets that can be invested in things other than home mortgages.

Both priorities have the same goal: to save the S&L industry by changing it into something else.

And both those wishes are likely to be granted, for there is a growing consensus in the Bush administration and Congress that more changes in government regulation of the thrift industry are necessary, even though others say constant changes in the rules of the game are a major cause of the industry's problems.

"What I'd like to see is a two-year moratorium on any further financial services legislation," said Mark Reidy, president of the National Council of Savings Institutions, a trade association that represents both S&Ls and their cousins, the 400 savings banks.

Savings banks may be the wave of the future for many S&Ls. Common in New England but rare in the rest of the nation, savings banks are state-regulated hybrids that are a cross between a bank and an S&L.

Like S&Ls, savings banks put most of their depositors' money into home mortgages, but their state charters give them broader powers to invest in other fields. Like other banks, savings banks pay less for federal deposit insurance than S&Ls.

The U.S. League, the National Council and the thrift holding companies all are pushing hard for the right of S&Ls to do what they call "charter flips" and trade in their S&L charters for those of savings banks.

So far, S&L regulator Ryan is holding back the switch to savings banks, concerned that the charter flips will allow thrifts to escape some of the reforms under the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), the cleanup and restructuring law of last year.

States permit savings banks to make some investments that were forbidden by the S&L reform law. But regulators are working on new rules that would apply the FIRREA reforms to savings banks and open the door to a wave of conversions.

The S&Ls want to become savings banks not only because of the additional powers and cheaper insurance, but also because it could allow them to escape the stigma of their past. Even though banks and S&Ls are indistinguishable to some depositors, the name savings and loan has become so tainted that other savers won't put their money in those institutions, or they expect to get a higher rate on their savings account if they do.

But the Sandlers of World Savings, who built a little California thrift with $34 million in deposits into a $20 billion giant, say they would continue to stick to the home mortgage business, just as they did to succeed years ago.

"I would operate identically to the way I operate today" even if the government rewrites the rules of the S&L business, Sandler said.

Ken Abt agreed that for First Federal, the most important businesses will continue to be home mortgages and home equity loans. Home equity loans are enabling First Federal to do more consumer lending -- which is generally more profitable than the mortgage business.

Return to Home Lending Returning to their roots in home lending may be the formula for the future for many S&Ls, but it won't work for all of them. The 100 or so multibillion-dollar institutions like World Savings can do it because they are big enough to be extremely efficient. So can several hundred little S&Ls -- outfits with no more than one or two offices and a couple of hundred million in deposits -- because they are intimately involved in their local communities.

But in the middle are nearly 1,000 thrifts that are too big to know every customer by name and too small to slug it out against New York-based Citibank, now the nation's No. 1 mortgage lender. For them, the only alternative to extinction may be broadening their business or becoming a bank.

Congress ought to make that transformation easier by doing away with the distinctions between institutions that are all in essentially the same business, but operate under three different federal regulatory agencies, many banking experts believe.

If the banking and S&L industries were to merge, the new financial institutions would still likely gravitate to their own niches. Some of the institutions would specialize in home lending, as S&Ls do now, and others would market themselves to commercial businesses or real estate development.

"We need to begin thinking of a common charter under a common, unified regulator," said Ken McLean, who after 20 years on the staff of the Senate Banking Committee now advises financial institutions on policy issues.

Congress next year will consider "the most important financial services legislation since the New Deal," McLean said, and that may mean the end of the S&L industry as it exists today.

"Congress is ambivalent to negative on the need for a thrift industry," he said. "If we were starting with a clean slate, we probably would not have a separate thrift industry."